Restaurants

Papa John's agrees to open 49 new sites as sales surge during pandemic

Key Points
  • Under the deal, franchisee HB Restaurant Group will more than double the number of its mid-Atlantic restaurants by 2028.
  • The pizza chain has experienced record sales in recent months as the Covid-19 pandemic has boosted business.
A "Now Hiring" sign is displayed outside a Papa John's International Inc. pizza restaurant in Louisville, Kentucky.
Luke Sharrett | Bloomberg | Getty Images

Papa John's is expanding its footprint in the Northeast as sales surge during the coronavirus pandemic with more consumers staying in and ordering out.

The company announced Thursday a deal in which franchisee HB Restaurant Group will open 49 new locations in Philadelphia and southern New Jersey by 2028. It's one of Papa John's biggest such deals in two decades.

HB Restaurant Group currently owns 43 restaurants in the mid-Atlantic area and has been a Papa John's franchisee since April 2019.

The pizza chain has seen significant growth over the last few months. In August, it issued a preliminary estimate of North American same-store-sales growth of 24.2% from July 27 through Aug. 23. That followed a preliminary estimate of same-store-sales growth, a key industry metric, of 30.3% in July in the region. In the second quarter, North American same-store sales rose 28%.

"It starts with sales and getting the positive momentum going. And the next part of that life cycle is really development," said Amanda Clark, Papa John's chief development officer. "We are still outnumbered by our key competition — for me, that is something very exciting. There's a huge runway for our existing franchisees in the system and new franchisees that want the opportunity for growth."

With sales remaining strong and the business growing, Clark said the brand is in a place to help franchisees develop their businesses whether by providing financial tools or helping scout out locations to maximize profits.

Opportunities also are starting to arise due to the pandemic's impact on the real estate market.

"We will probably have better location availability than we've had in the past because of Covid," said Clark, a former executive vice president at Taco Bell overseeing the customer experience across retail. "That is something we can take advantage of and our franchisees will be able to benefit from."

Fortressing, or having locations in close proximity to one another, has been a tactic of pizza competitor Domino's in recent years to shorten delivery times and boost carryout business. Clark said Papa John's focus is to continue to accelerate growth with more locations in the years to come so that customers can easily access delivery and carryout orders.

Nearly all of Papa John's traditional restaurants are open and fully operational in North America, and just over 100 remain closed internationally, in accordance with government policies, the company said in its latest business update. The pizza chain operates in 47 countries. 

Papa John's is also looking to expand internationally as sales outside the U.S. are also gaining momentum, Clark said. 

Under CEO Rob Lynch, who took over in August 2019, menu innovation has been a key focus and driver of sales. Digital platforms also are performing well, with 3 million new customers added in the second quarter and 70% of orders coming in digitally. This growth has led to several hiring announcements in recent months, bringing its total to 30,000 workers hired throughout the pandemic to meet demand.

The stock, which has a market value of $2.9 billion, is up some 40% year to date, and is one of the best performers in the restaurant space this year.

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